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Fast fashion

The rush of international fast fashion chains into Australia has shown that local retailers have become "lazy", according to the boss of retailer and IPO hopeful PAS Group.

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You've been told it was the internet, that it was the economy, it was high wages, the government, the consumer, that it was the strong Australian dollar or maybe the weak Australian dollar.

It was anything but second-rate management and dull boards that were responsible for Australian retail's poor performance - yet it turns out it was poor management all along.

David Jones.

David Jones management has not grasped the future. Photo: Wayne Taylor

As South Africa's Woolworths joins the push of international shopkeepers into the Australian market with its David Jones takeover bid, it's another indication of outsiders seeing value and opportunity that the locals had missed.

Marked down

Most obviously in fashion, a wave of luxury brands have set up shop and pushed DJs down to mid-market status. Zara and now H&M are raking the money in with fast fashion – in Zara's case, at a better margin than it achieves internationally. And more foreigners are on the way, seeing this market with fresh eyes.

And it's not just fashion. The two big retail turnaround success stories here have been thanks to outsiders. Wesfarmers had to bring in the Brits to fix Coles and someone with no retail experience – MacDonalds' Guy Russo – to save Kmart.

And Wesfarmers itself wasn't exactly an Australian retailer beyond its hardware operation.

There are exceptions – Australia's Woolworths has grown its own – but broadly speaking, it's the outsiders who have been making the most of their opportunities while the more prominent local whingers try to blame somebody, anybody else.

New normal

Yes, overall retail sales numbers were down for a while from the boom-time levels local retailers had mistakenly thought were normal.

Yes, the internet has changed the game, more because of the information it provides for consumers than through the ability to buy directly overseas.

And Australian retail wages are relatively high by international standards, though generally not high by our own standards.

These are all givens, the ground conditions for all players.

It's been up to management to make the best of those conditions and succeed – a task that's been beyond some of them.

It's been up to their boards to have an eye to the future, to see and enforce the need for change and renewal, instead of hoping to just keep doing what they had always done, traipsing along a season behind overseas leaders, a decade behind the leading edge of retailing.

Lower prices

It's a sad reflection of the fate of David Jones, Australia's oldest department store, trading since 1838, that the board now welcomes a takeover offer of $4 a share – what the place was worth three years ago.

It's sadder that, since it was re-floated out of the Adsteam wreckage in 1994, it's lacked boards with much in the way of retail vision.

I have some sympathy for the current management.

Paul Zahra is taking over a company that had drastically underinvested in its future, concentrating on immediate profits using a dying formula while persevering with a steam-powered point of sale system.

That can happen when the board lacks retail experience, as was the David Jones case. That the board could then be capable of amateur hour governance standards is merely an indication of a longer-lasting malaise.

In my opinion, Zahra's (and Myers') online plan still looks like a cut-and-paste job from Nordstrom's annual report and has poor prospects, but they have been trying.

South Africa's Woolworths will have to try harder, but if the takeover succeeds, DJs will have removed the uncertainty created by its boardroom failures and secured a focussed parent with broader retailing experience and ambition than just South Africa.

The South Africans' move comes at an interesting time when the Australian consumer has indeed stirred with overall retail sales for the past six months again bubbling incredibly strongly – but while the department store sector of our retail environment still lags, losing market share and recording lower revenue than it did two years ago.

Michael Pascoe is a BusinessDay contributing editor.